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Australia is currently New Zealand’s main trading partner in terms of imports and exports of goods and services. Australia is also the key destination and source when it comes to direct investment. Japan, the United States of America (USA), the European Union (EU) and the Association of South East Asian Nations (ASEAN) are also important economic partners for New Zealand. This article focuses on current account transactions.

Australia is New Zealand’s most significant trading partner1

In 1983 New Zealand and Australia signed the ANZCERTA (Australia New Zealand Closer Economic Relations Trade Agreement). This agreement, which was reviewed in 1988, provided for the reduction and eventual removal of trade barriers between the two countries. This economic relationship between Australia and New Zealand remains a vital one from New Zealand’s perspective.

Australia is currently New Zealand’s main trading partner in terms of imports and exports of goods and services. Australia is also the key destination and source when it comes to direct investment. Fifty-four percent of New Zealand’s direct investment abroad is in Australia, and 36 percent of all foreign direct investment in New Zealand comes from Australia.

Australia’s proximity to New Zealand makes it a key market for tourism. Australians represent the single largest visitor group to New Zealand in terms of the number of travellers, and they contribute 16 percent of total visitor expenditure. Australia is also the most common destination for New Zealanders travelling abroad, with more than half of all New Zealand travellers visiting there.

Japan, the United States of America (USA), the European Union (EU) and the Association of South East Asian Nations (ASEAN) are also important economic partners for New Zealand. New Zealand’s transactions with these partners continue to grow year upon year.

This article focuses on current account transactions. For country breakdowns of financial asset stocks and flows, see the Hot Off The Press information release Balance of Payments and International Investment Position (Additional Informational on International Investment): Year ended 31 March 2002.

Current account

The balance of payments current account measures the value of New Zealand’s import and export transactions with the rest of the world. As well as goods, the current account measures transactions in services, investment income, and current transfers.

The total value of two-way current account transactions for the year ended March 2002 was $96.1 billion, $25.5 billion higher than in 1999.2 Two-way transactions refer to the sum of credits (exports) and debits (imports). New Zealand’s two-way current account transactions have grown, on average, by 11 percent per year since 1999.

By category, the value of two-way transactions in goods ($62.8 billion) remains the largest component representing around 66 percent of New Zealand’s total imports and exports values in 2002. The value of two-way transactions in goods has increased by $18.3 billion, or an average of 12 percent per year from 1999 to 2002.

The value of two-way service transactions is the next largest category at $20.4 billion, or 21 percent of the total value of current account transactions. Two-way service transactions have grown $4.3 billion, or an average of 9 percent per year between 1999 and 2002. New Zealand’s largest service components are travel and transportation, with two-way transactions worth $9.1 billion and $6.0 billion, respectively in 2002.

Two-way investment income transactions have grown from $8.3 billion in 1999 to $10.5 billion in 2002. This represents an average increase of 8 percent per year since 1999. New Zealand has an investment income deficit, which means that non-residents earn more money from their assets in New Zealand than New Zealanders earn from their assets abroad. In 2002, investment income earned by New Zealanders from overseas was $1.9 billion, while investment income earned by foreign investors in New Zealand was $8.6 billion.

Two-way current transfers transactions were $2.3 billion in 2002, growing, on average, 9 percent per year since 1999. Transfers represent transactions where resources are supplied but no exchange has taken place, such as a donation or a gift. In such cases, the double-entry requirement of balance of payments means that there has to be an offsetting entry. This entry is called transfers. Current transfers are classified as either government transfers or other sector transfers.

Goods

Goods cover all movable merchandise goods where the ownership changes place between a resident and a non-resident. In the balance of payments, goods are divided into five components: general merchandise, goods for processing, repairs on goods, goods procured in ports by carriers and non-monetary gold. The total value of two-way transactions in goods was $62.8 billion in 2002. Exports were worth $33.0 billion, and imports were valued at $29.9 billion.

The main component of goods is general merchandise, which comprises adjusted merchandise trade data. Merchandise trade data comes from customs entries lodged for imports and exports.

Exports are expressed as free on board (fob) values. Free on board includes the value of the good, as well as the cost of getting the good to the customs frontier of the exporting country. The cost of moving goods beyond this point is included in transportation services.

Imports are valued at either value for duty (vfd) or cost, insurance, freight (cif). Value for duty is similar to the fob valuation, while cif includes transportation costs. In the balance of payments the vfd valuation is used.

Merchandise trade exports

New Zealand’s total merchandise trade exports in 2002 were $32.7 billion. Merchandise trade exports have increased $10.7 billion or an average of 13 percent per year since 1999. New Zealand’s export markets have become much more diverse since the 1950s when more than 65 percent of New Zealand’s exports went to the United Kingdom (UK).

Australia is New Zealand’s largest export market by region, and accounted for $6.3 billion or 19 percent of all merchandise exports in 2002. These exports to Australia have grown, on average, 9 percent per year since 1999. Significant exports to Australia include machinery and equipment ($645 million), mineral fuels, mineral oils and products ($493 million), and logs, wood and wood articles ($353 million).

The EU is the second largest export market for New Zealand’s goods exports. From 1999 to 2002, exports to the EU have grown, on average, 8 percent per year, and are now worth $4.9 billion. Exports of meat and edible offal to the EU were valued at $1.7 billion in 2002, or 35 percent of New Zealand’s exports to the EU. Other significant exports to the EU in 2002 were dairy products ($739 million), and wool ($316 million).

The USA is becoming increasingly important as an export destination for New Zealand goods. In 2002, goods exports to the USA were worth $4.9 billion, and a 15 percent share of total goods exports. Since 1999, the value of New Zealand’s goods exports to the USA has increased by an average of 18 percent per year. The USA is New Zealand’s largest individual market for meat and edible offal. In 2002 meat exports to the USA were worth $1.3 billion, and accounted for 26 percent of all goods exports to the USA.

Exports to ASEAN countries were worth 9 percent of New Zealand’s total merchandise trade exports in 2002. Exports to ASEAN countries are becoming more significant, growing from $1.6 billion in 1999 to $2.9 billion in 2002. This represents average annual growth of 23 percent between 1999 and 2002. Dairy products, at $1.7 billion, represented 59 percent of New Zealand’s total exports to ASEAN countries in 2002.

Goods exports to other countries in 2002 were valued at $9.7 billion, or 30 percent of total merchandise trade exports. Exports to other countries have increased, on average 16 percent per year since 1999. Other countries excludes Australia, USA, Japan, and the EU and ASEAN member countries.

Merchandise trade imports

Merchandise imports were $29.8 billion for the year ended March 2002. This is an average annual increase of 11 percent since the $22.1 billion recorded for goods imports in 1999.

Australia is New Zealand’s most significant trading partner in terms of goods imports.

Merchandise trade imports from Australia represented 22 percent of New Zealand’s total imports in 2002. Imports of goods from Australia were worth $6.7 billion in 2002, up $1.8 billion or 11 percent per year on average since 1999. Imports from Australia with the largest values in 2002 were in mineral fuels ($845 million), vehicles, parts and accessories ($587 million) and mechanical machinery and equipment ($410 million).

The EU accounted for 19 percent of New Zealand’s imports in 2002 ($5.6 billion). The value of imports from the EU has grown $1.3 billion since 1999, or an average of 9 percent per year. Imports of vehicles, parts and accessories were worth $1.1 billion, or 19 percent of all imports from the EU in 2002. The value of vehicle imports from the EU has more than doubled since 1999, when they represented 12 percent of all imports from the EU. Other significant imports from the EU in 2002 were mechanical machinery and equipment ($1.0 billion), and electrical machinery and equipment ($520 million).

The third largest source of New Zealand’s imports in 2002 was the USA. At $4.7 billion in 2002, USA imports represented 16 percent of New Zealand’s total imports. This is slightly down from 1999 when USA imports were worth 19 percent of total imports. Imports of mechanical machinery and equipment from the USA were $1.0 billion in 2002. Other major imports from the USA in 2002 were aircraft and parts ($749 million) and electrical machinery and equipment ($639 million).

Imports of goods from Japan have increased on average 9 percent per year, from $2.6 billion in 1999 to $3.3 billion in 2002. Vehicles, parts and accessories account for the majority of New Zealand’s imports from Japan. In 2002, imports of vehicles, parts and accessories from Japan were worth $1.8 billion, or 53 percent, of New Zealand’s imports from Japan. Around threequarters of New Zealand’s car imports originate from Japan. Other significant imports from Japan in 2002 were mechanical machinery and equipment ($511 million) and electrical machinery and equipment ($229 million).

In 2002, ASEAN imports were worth $2.5 billion, or 9 percent of total goods imports. Imports of goods from ASEAN countries are becoming more significant and have grown, on average, 18 percent per year since 1999. In 2002, the largest import from ASEAN countries was mineral fuels, mineral oils and products ($558 million). This is more than triple the value of mineral fuel imports in 1999. Other significant imports from ASEAN countries were mechanical machinery and equipment ($451 million) and electrical machinery and equipment ($328 million).

Merchandise trade imports from other countries were valued at $6.9 billion in 2002, or 23 percent of New Zealand’s total goods imports. Other countries includes every country other than Australia, USA, Japan, and the EU and ASEAN countries.

Services

Services in a broad sense, are products other than goods. The two important characteristics of services are:

a service has no physical object over which ownership rights can be established; and

a service cannot be traded separately from its production.

Services that are performed by New Zealand residents for non-residents are exports, while services provided by non-residents to New Zealand residents are imports. The value of New Zealand’s two-way service transactions with the rest of the world was $20.4 billion in 2002. Exports of services were $10.5 billion, and imports were $9.9 billion in 2002.

Services that are excluded from the country analysis are transportation services, insurance services, government services, and travel service imports, as no country breakdown is available for them. Travel service exports are also excluded from ‘other services’ but a regional analysis of visitor expenditure is included elsewhere in this article.

Other services

Figure 6 shows only the services for which country data is available. Those services included are communications services, construction services, financial services, computer and information services, royalties and licence fees, and other business services.

In 2002, two-way transactions in other services were $4.7 billion. Of this, $1.8 billion represented exports of other services, while imports were worth $2.9 billion.

Of the other services, Australia was the biggest contributor in 2002 with $1.2 billion worth of twoway transactions. Exports of other services to Australia were worth $503 million. The largest other service exports to Australia were in communications services and legal, accounting and management services. Imports of other services from Australia were worth $671 million in 2002. The largest contributors were transactions for royalties and licence fees, and communications services.

Other services two-way transactions with the USA were $1.1 billion in 2002. Exports of other services were $434 million in 2002. The most significant service export types to the USA were computer and information services, communications services and sports and recreational services. Imports of other services from the USA were worth $657 million in 2002. The largest contributors were transactions for personal, cultural and recreational services, and computer and information services.

The EU was the third largest contributor to twoway other services in 2002 with transactions valued at $862 million. New Zealand’s receipts from the EU of other services were valued at $493 million in 2002. The main service types that contributed to these receipts were communications services, and legal, accounting and management services. Imports of other services from the EU were worth $369 million, with the main contributors being transactions for royalties and licence fees and communications services.

Japan and ASEAN countries’ contribution to twoway other services were $305 and $199 million, respectively. New Zealand’s largest other service exports to Japan were in merchanting services.

The largest contributors to exports of other services to ASEAN countries were in merchanting, and architectural and engineering services.

Two-way other service transactions with other countries were worth $1.1 billion in 2002 or 23 percent of total other service transactions. Other countries includes those countries not already discussed (Australia, USA, Japan, EU countries and ASEAN countries) as well as countries unknown or not specified, and undercoverage estimates for services for which data is not assigned to a country.

Travel services

In the balance of payments, travel services measures the expenditure on goods and services by New Zealanders travelling abroad, and by overseas visitors travelling in New Zealand. Airfares are excluded from travel, as they are included in transportation services. Travel service exports are becoming increasingly important for New Zealand’s economy. In 2002, travel service exports, at $5.8 billion, accounted for 55 percent of New Zealand’s services exports.

Travel expenditure in New Zealand by overseas visitors is measured by the International Visitor Survey (IVS). Statistics New Zealand supplements IVS data with information from the Ministry of Education, and surveys of English language schools for estimates of education related travel. Total travel expenditure as measured by the IVS was $5.5 billion in 2002, representing average annual growth of 16 percent since 1999. The following regional analysis of travel exports is based on IVS data prior to education adjustments. There were 1,702,969 overseas visitors to New Zealand in 2002. This is an average annual increase of 8 percent on the 1,368,029 visitors in 1999.

In 2002, spending in New Zealand by overseas visitors from the Asia Oceania region accounted for $1.4 billion or 24 percent of total travel expenditure by visitors in New Zealand. Spending by the Asia Oceania region has increased an average of 33 percent per year since 1999. There were 381,856 visitors from the Asia Oceania in 2002, representing 22 percent of visitors from all regions. Visitors from the Asia Oceania region stayed an average of 22 days in 2002; this is a factor in their high contribution to overall visitor expenditure.

Australian tourists contributed $907 million to New Zealand’s travel exports in 2002, representing 16 percent of total visitor expenditure in New Zealand. Of the overseas visitors to New Zealand in 2002, 31 percent of them or 528,600 were from Australia. Australian visitors, on average, spent 11 days each in New Zealand in 2002.

UK expenditure, at $777 million, accounted for 14 percent of total visitor expenditure in New Zealand in 2002. Spending by visitors from the UK has increased, on average, 18 percent per year since 1999. There were 202,631 visitors from the UK in 2002, representing 12 percent of all visitors to New Zealand. The average length of stay for UK visitors was 32 days in 2002.

In 2002, visitors from the USA contributed $766 million or 14 percent of total visitor expenditure in New Zealand. Visitors from the USA (173,432) represented 10 percent of all visitors to New Zealand in 2002. USA visitors stayed on average 16 days in 2002, and had the second highest expenditure per person per day. Visitors from Japan contributed $622 million or 12 percent of total visitor expenditure in 2002.

Visitors from Japan in 2002, at 145,302, accounted for 9 percent of visitors overall. Japanese visitors had the highest mean expenditure per person per day of all visitors in 2002.

Visitors from other countries contributed $1.1 billion or 19 percent of total visitor expenditure in New Zealand in 2002. Visitor expenditure by other countries has increased, on average, 17 percent per year since 1999. Other countries include every country other than Australia, the UK, USA, Japan, and countries in the Asia Oceania region. Visitors from other countries (271,418) accounted for 16 percent of total visitors to New Zealand in 2002. Other countries include all countries other than Australia, USA, the UK, Japan and countries in the Asia Oceania region.

New Zealand departures overseas

No regional breakdown is available of New Zealand travellers’ expenditure overseas. Therefore, this article will focus on the main destination for New Zealand travellers.

In 2002, New Zealander travellers made 1,286,868 trips overseas as measured by short-term departure numbers. Short-term departures are for 12 months or less. Total expenditure by New Zealander travellers abroad in 2002 was $3.1 billion, or 32 percent of total services imports.

Australia was the most popular overseas destination for New Zealand travellers in 2002. The 670,932 trips to Australia represented 52 percent of all overseas visits by New Zealanders. This proportion of New Zealand travellers visiting Australia has remained fairly static since 1999. In 2002, 74 percent of New Zealand travellers visiting Australia stayed for less than two weeks.

The USA was the second largest visitor destination for New Zealander travellers with 65,184 visiting there in 2002. The USA represented just 5 percent of total short-term departures in 2002, down slightly from 1999 when the USA was the destination for 7 percent of New Zealand travellers. Forty-one percent of New Zealand travellers to the USA stayed for less than two weeks in 2002.

The United Kingdom was the destination for 5 percent of New Zealand travellers in 2002. The UK is a traditional destination for New Zealanders going on their overseas experience (OE). In 2002, 54 percent of New Zealand travellers visiting the UK stayed for one to six months. New Zealanders who stay overseas for more than one year are excluded from short-term departure figures.

Japan was the destination for 1 percent of New Zealand travellers in 2002. The proportion of New Zealand travellers visiting Japan has stayed at 1 percent since 1999. In 2002, 48 percent of New Zealand travellers to Japan stayed for less than two weeks.

Some 473,473 New Zealand travellers visited other countries in 2002. The number of New Zealand travellers visiting other countries has increased, on average, 7 percent per year since 1999. Other countries includes all destinations other than Australia, USA, the UK and Japan.

Income

Investment income comprises income derived from the ownership of international financial assets. Investment income credits refer to income accruing to New Zealand residents from ownership of foreign assets. Investment income debits refer to the income accruing to non-residents from their ownership of New Zealand assets.

New Zealand has an investment income deficit, which means that foreigners earn more income from New Zealand assets than New Zealanders earn from foreign assets. This is due to the level of foreign investment in New Zealand, which is much higher than New Zealand investment abroad.

For the year ended March 2002, New Zealand’s two-way investment income transactions were $10.5 billion. By region, the largest contributor to New Zealand’s investment income transactions was the EU, with $3.3 billion or 32 percent of the total. Investment income transactions with Australia accounted for $2.3 billion or 22 percent, while the USA’s two-way transactions with New Zealand totalled $1.9 billion (18 percent).

Investment income transactions by Japan and ASEAN countries were just $0.2 billion and $0.5 billion, respectively. The category ‘other’ contributed $2.2 billion (21 percent) of all investment income transactions. The ‘other’ category excludes Australia, the USA, Japan, EU countries and ASEAN countries, and includes transactions where the country is unknown or not specified.

Footnotes

1 This article was prepared by Jason Attewell of the International Accounts Division of Statistics New Zealand.2 All numbers refer to the year ended 31 March, unless otherwise stated.

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